How I build businesses I don’t work in

Hey everyone,

I've started a ton of businesses over the last few decades, all with the same goal: Not to work in any of them.

So many founders end up becoming employees of their own companies. If that’s what you want, great!

But I don’t want to buy myself a job. 

If that appeals to you, read on. Here are my…

Let’s do it!

When you start a business, everyone tells you the same thing: roll up your sleeves, hustle, be in the trenches. That makes sense.

But when you work in your own business, sooner or later, you become the bottleneck.

Your business is limited by your own personal capacity.

So if you want to build multiple businesses, you need a different model. 

This is called incubation: starting a business you don’t actually work in.

You get it going, you provide capital and expertise, you do the meta work. But other people run it.

And when you build businesses you don't work in, you're forced to hire better people (who don’t need you) and create better systems (that work without you). 

So how do you do it?

Here are three counterintuitive principles I use:

Most people starting a business spot an opportunity, get excited, and jump in.

I do the opposite. I start with my constraints.

What can I afford to lose? What do I already have access to? Who do I already know?

This comes from something called the effectuation model, a framework that studies successful entrepreneurs instead of business school curriculums. (More about that here.)

Two principles matter most:

Here's what this means for your business: stop chasing the big idea. Start with what's in your hands right now.

What industry do you already understand? Who do you already know? What could you start with $10K instead of $100K?

Constraints breed creativity. Limitations force focus. And focus is what makes money.

This sounds insane, but it's the secret.

I call it the associate model. You find someone smart in their 20s, train them for 3-6 months in business fundamentals, and then build a company around them.

They become the CEO. You're just a board member.

I did this with a coffee shop business. Found two co-founders, trained them up, and we built the whole thing without me ever working there. Sixty employees. Sold it three years later.

Most people think you need the business idea first, then you hire people to execute it. But that's backward.

When you find great people first, the business idea emerges from their strengths. You're building on someone's capabilities rather than forcing them into your predetermined plan. 

And the most important part: when they’re just as involved in the idea as you are, that’s how you get a “missionary” instead of a “mercenary”.

For your business, this means: stop trying to do everything yourself. 

Find someone who wants to run a company. 

Give them equity and autonomy. 

Build something with them, not despite them.

Yes, this requires trust. Yes, this requires letting go. But that's the whole point. 

If you can't build something that works without you, you haven't built a business. You've built a job.

Here's the mistake that kills incubation: getting emotional about ideas.

You brainstorm, you get excited, you convince yourself this is the one — and six months later you realize you've built something you don't actually want.

So I use a new venture checklist. Before I touch an idea, it has to check specific boxes. Mine includes things like:

Make your list. Force yourself to be ruthlessly honest. Because excitement wears off. Structure stays.

If you don't have one, you're just gambling on whatever sounds good in the moment.

→ Read more: Making a business buying checklist

The businesses I've incubated — from coffee shops to staffing companies — all follow this backward approach. Constraints first. People first. Premeditation first.

Because the goal isn't to work more, the goal is to build things that work without you.

Which trap are you in right now? Working in the business or on it?

Thanks for reading!

Michael

P.S. If you want to see the full framework I use for this, I did a lecture on incubation this summer. You can see the recording here. The effectuation model alone changed how I think about risk.